How Ekta Blockchain’S Fractional Real Estate Nft Aims To Tokenise Real World Properties

Investments in real estate can often offer substantial returns in just a matter of years. However, purchasing any property in today’s day and age requires a significant amount of capital upfront. This limits property investments to a select few. This is something that blockchain network Ekta is looking to change through the launch of its fractional real estate NFTs.

Ekta is a blockchain that brings physical assets and communities on-chain. The company is planning a public listing, and by mid-January had raised seed funding and private sales of over $5 million.

What are fractional NFTs?

Non-fungible tokens (NFTs) are blockchain-backed digital tokens that represent the ownership of an asset. Their decentralised nature means they are secure, one-of-a-kind, and cannot be tampered with or modified. They guarantee ownership as all essential details of the asset are coded into them and updated as the ownership of the asset changes hands.

However, an NFT can only be owned by one person and there is currently no scope for shared ownership of digital assets. This led developers to create the concept of fractional ownership. This allows crypto investors to own and exchange a fraction of the NFT. This can be thought of as owning equity shares of an organisation, where no matter how many shares you own, they entitle you to a proportional stake in the company. Here’s how it is done.

How do Fractional NFTs (F-NFTs) work?

A fractional NFT is one NFT divided into multiple stakes. It is achieved using a smart contract that splits one NFT into a fixed number of tokens, each of which is linked with the parent NFT. Each token represents a percentage of the NFT and, in turn, the underlying asset. Each token can be individually traded in the crypto market. The tokens are updated with the new owner’s data every time it changes hands. Therefore, each token can be traced back to its first owner.

Such NFTs are ERC-721 tokens, i.e., following a set standard on the Ethereum blockchain. This ERC-721 NFT is then locked in by a smart contract which contains details regarding the number of tokens the NFT will be split into. Based on this information, the decided number of ERC-20 tokens are created. The ERC-20 standard indicates that the token is Ethereum-based and associated with a specific type of smart contract which monitors the transactions these tokens become part of. This improves the traceability and the security of the transaction.

Now that we know how assets can be fractionalised, let us figure out what it means in the context of real estate.

What is fractionalised real estate?

Just as digital assets can be divided into stakes held by different owners, the same is possible with physical assets too. The physical asset is ‘tokenised,’ during which the ownership rights of the property are coded and fed to the blockchain. In the real world, the fractionalisation of a physical asset allows multiple people to pool in the money and gain joint ownership. Therefore, fractionalised real estate is nothing but a tokenised form of property that is paid for and owned by multiple people.

The benefits of fractionalisation include reduced start-up capital, hassle-free transacting, and complete traceability of ownership. It also broadens the buyers’ market as one asset can be sought after and owned jointly by multiple interested parties. It even enables leasing and helps establish a passive revenue stream for the asset owner.

What does Ekta bring to the table?

Ekta has created a single platform that unifies all aspects of investing in the real world with everything that facilitates the same digitally. Their layer-1 blockchain has been harnessed to put decentralisation at the forefront of real estate investing. By leveraging these capabilities, Ekta has fractionalised interest yielding assets. This means, as the price of the underlying physical asset appreciates, token owners can earn dividends, yields and other rewards.

The Ekta real estate NFT marketplace is a decentralised platform that eliminates all the middlemen involved in the purchase of any real estate. Investors can simply buy NFTs to claim ownership of a property. They can even make a rental income without having to chase tenants to collect rent. It is all handled and managed by a smart contract.

Ekta intends to commence operations by enabling the buying and selling of term-based leases through token trades. Experts believe that fractionalised NFT tokens will be released towards the end of March 2022. MNCs and other real estate developers will release their respective offerings from April 2022. Investors who wish to participate in the purchases must also be holding the EKTA token.

Interested people will gain easy access to details such as the property’s location, its price, pictures, expected appreciation, projected return on investment (ROI), etc., through the web or a decentralised mobile application (dApp). All of these projections and details will be based on the performance of the real estate segment in the real world.

The purchase of EKTA tokens and later the F-NFTs will be settled instantaneously with a minimal transaction fee. Once the F-NFTs are with the respective owners, associated rewards and dividend pay-outs will get credited on a monthly basis. These rewards will work in a similar fashion as the dividend on equities, i.e., they will be disbursed from the net profit made from the sales of the underlying asset. Sales proceeds will include all revenue sources, including the income generated in fiat currency by the asset in the real world. Investors (owners of F-NFTs) are free to exit their stake by selling their tokens at any time.

“People around the world looking to reap the rewards of investing in cryptocurrency are discovering that they’re faced with no reliable option to convert their crypto into something they can use. Ekta Real Estate will fill that gap. Using F-NFTs on Ekta’s blockchain (“EktaChain”), we will be providing early liquidity for real estate developers while also enabling access for anyone to easily purchase fractions of high-value, interest-bearing, fully managed investment properties,” said Berwin Tanco, CEO of Ekta to CoinTelegraph.

Ekta has indicated that its first sale will be a development project in Bali where the real estate will have 206 units worth $100 million. The company also intends to engage in green initiatives that include carbon-offsetting activities.

(Edited by : Priyanka Deshpande)

First Published: Mar 07, 2022, 08:46 PM IST